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Schumpeterian Profits and the Alchemist Fallacy Revised

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  • Nordhaus, William D.

    (Yale U)

Abstract

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. The paper derives the underlying equations for Schumpeterian profits. It then estimates the value of these profits for the non-farm business economy and for major industries. It concludes that only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers. These results indicate that the bubble of new-economy stocks in the 1990s resulted from the alchemist fallacy.

Suggested Citation

  • Nordhaus, William D., 2005. "Schumpeterian Profits and the Alchemist Fallacy Revised," Working Papers 6, Yale University, Department of Economics.
    • Handle: RePEc:ecl:yaleco:6
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    File URL: http://economics.yale.edu/sites/default/files/files/Working-Papers/wp000/ddp0006.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The growth problem
      by chris dillow in Stumbling and Mumbling on 2011-08-07 16:01:20

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    Cited by:

    1. Charles Hulten & Leonard I. Nakamura, 2020. "Expanded GDP for Welfare Measurement in the 21st Century," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 19-59, National Bureau of Economic Research, Inc.
    2. Oulton, Nicholas, 2012. "Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting," Economic Modelling, Elsevier, vol. 29(5), pages 1722-1736.

    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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